Which of the following are included in the narrow definition of the money supply?

checkable deposits

Asymmetric information in financial markets exists when

borrowers know more about their ability to repay loans than lenders do

Net Worth on a bank's balance sheet is

sometimes called the owners' equity

A bank's assets include all but one of the following. Which one is the exception?

checkable deposits

If you know the required reserve ratio and the total value of a bank's assets, then you know how much the bank is holding in reserves.

False

If a bank has $6,000 in checkable deposits and the required reserve ratio is 0.2, then the bank can lend

No more than $4,899

Banks want to minimize their holdings of excess reserves because

excess reserves earn no interest

The immediate effect of a member bank's sale of U.S. government securities to the Fed is a(n)

increase in that bank's excess reserves

What essential factor enables commercial banks to create money?

excess reserves

If the required reserve ratio is 0.2, and the Fed buys $3,000 of U.S. government securities, the maximum amount by which the money supply can increase is

$15,000

The actual money multiplier is smaller than the simple money multiplier because

cash withdrawals reduce the amount banks can lend out

Suppose the banking system has no excess reserves and required reserves equal to 20 percent of checkable deposits. If the Fed sells $10,000 in securities to Joe Bankustomer, what is the most that checkable deposits in the banking system fall? (Hint: Compare what the banking system might have done if it had loaned at every opportunity; also include the initial transaction with the Fed.)

$50,000

Which of the following is not one of the procedures the Fed uses to change the money supply?

extending loans to the public

Increasing the required reserve ratio is

a contractionary policy because it lowers the amount of excess reserves in the banking system

To increase the money supply, the Fed might

decrease the reserve requirement and the discount rate

If the Fed buys U.S. government securities from a bank and credits the bank's reserve account,